Today, more than ever individuals should be concerned about their retirement savings, and if they will have enough to see them through their golden years. Currently, social security benefits are all that many Americans have to see them through their retirement, and with inflation, escalating medical expense, and prescription drug costs, many senior citizens simply cannot make ends meet on their fixed incomes. In addition to these concerns, many of our citizens known as the “baby boomers” are reaching retirement age. With more and more of our population retiring, the need for adequate funding is an ever increasing concern for all individuals.

The Individual Retirement Account or IRA, is the original idea conceived to help the individual that had no retirement plan through work save for their retirement, tax free. The traditional IRA option allowed tax payers to invest in an IRA and deduct it from their adjusted gross income at the end of the year, thus saving them money on their tax liability. In other words, the savings was really a pre-tax deduction. Today, there are more versions available, and some have restrictions on the tax deduction you’re allowed to take. Nonetheless, the savings benefit is still ever present.

With all the fluctuation of the stock market, investments that individuals had in the stock market, may or may not still provide adequate funding for their retirement. Many individuals that had retired and placed their funds in stocks have now found that they must return to work, even if only part-time, in order to maintain their current standard of living. That’s a place no retired individual wants to be. The IRA plans offer less of a return, buy they’re also a much safer option.

Contribution limits on IRAs have been increasing for the last several years, and currently for 2005 are at $4500 for non-working spouses, the same level applies. So for a household of taxpayer and non-working spouse, a combined contribution of $9000 may be made this year. In addition to the yearly contribution, for all individuals over the age of 50, catch-up contributions of $500 for each may be made. That raises the limit to $10,000 this year.

The only other concern the individual contributor should have is the tax deduction status of the contribution; depending upon your filing status, income level, and availability of a 401(k) plan at work, your deduction may or may not be limited. The masses will be able to take the contribution as at least a partial deduction; for the few tax payers earning more than $80,000 or $160,000 for spouses covered by an employee retirement plan, there is no deduction. However, for many of the individuals who would fall into this category, there are usually more options available than the simple IRA.

The taxes on the investment growth, and any dividends accumulated are deferred until the money is withdrawn, and it is then taxed as additional ordinary income when received. If for some reason you should need to withdraw the money prior to attainment of age 59½, you will be assessed a 10% penalty, with few exceptions; there are however a few of those “exceptions” that might apply to many individual tax payers. Withdrawals for the purchase of a first home, to pay for college expenses for yourself, your spouse or your dependents, disability, or payment of medical expenses that exceed more than 7.5% of your adjusted gross income and for substantially equal payments based upon your life expectancy are not assessed a 10% penalty. These are sometimes referred to as “hardship withdrawals”.

As with any other type of investing, any individual that is interested in investing in an IRA, MSA, 401(k), or any other form of retirement planning, should seek the advice of a trained professional.